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Characteristics of Partnership 1. Consensual 2. Nominate 3. Bilateral 4. Onerous 5. Commutative 6. Principal 7. Preparatory Requisites of Partnership 1. valid contract 2.

legal capacity to enter 3. mutual contribution of mpi to common fund 4. object must be lawful 5. primary purpose it to obtain profit and intention to divide among themselves No legal capacity 1. unemancipated minor 2. insane or demented person 3. deaf-mute who do not know how to write 4. persons suffering from civil interdiction 5. incompetents 6. persons prohibited from giving each other a donation Art.1768. The partnership has a juridical personality separate and distinct from that of each partner. may acquire and posses property of all kinds. incur obligations bring civil and criminal actions Art. 1769. In determining whether a partnership exists: 1. persons who are not partners to each other are not partners to third person 2. co-ownership or co-possession does not of itself establish a partnership; whether they do or do not share profits from the use of property 3. the sharing of gross returns does not of itself establish a partnership; whether or not they share a joint or common interest Receipt of a person of a share of profit is not an evidence of a partnership when: a. payment of a debt or otherwise b. wages of an employee or rent to a landlord c. annuity to a widow or representative of a deceased partner d. interest of a loan e. consideration of a sale of a goodwill of a business or other property by installment
Partnership vs Co-ownership

Art. 1771. Partnership may be constituted in any form (orally or in writing) except: immovable property or real rights are contributed (with inventory that is made, signed by the parties and attached in the public document) every contract having a capital of 3,000 or more must appear in a public document and registered in SEC When the contract falls under the coverage of the Statute of Frauds (Art. 1409) UNIVERSAL PARTNERSHIP a. UNIVERSAL PARTNERSHIP OF ALL PRESENT PROPERTY comprises the following: i. Property which belonged to each of the partners at the time of the constitution of the partnership ii. Profits which they may acquire from all property contributed b. UNIVERSAL PARTNERSHIP OF PROFITS - comprises all that the partners may acquire by their industry or work during the existence of the partnership, as well as usufructs of movable or immovable. NOTE: Persons who are prohibited from giving donations or advantage to each other cannot enter into a universal partnership. (Art. 1782) 2. PARTICULAR PARTNERSHIPhas for its objects: a. Determinate things b. Their use or fruits c. Specific undertaking d. Exercise of profession or vocation DIFFERENCES BETWEEN GENERAL AND LIMITED PARTNER/PARTNERSHIP GENERAL Personally liable for partnership obligations When manner of mgt. not agreed upon, all general partners have an equal right in the mgt. of the business Contribute cash, property or industry Proper party to proceedings by/against partnership Interest not assignable w/o consent of other partners Name may appear in firm name Prohibition against engaging in business Retirement, death, insolvency, insanity of general partner dissolves partnership LIMITED Liability extends only to his capital contributions No participation in management

Contribute cash or property only, not industry Not proper party to proceedings by/against partnership Interest is freely assignable Name must NOT appear in firm name No prohibition against engaging in business Does not have same effect; rights transferred to legal representative

Creation Juridical Personality Purpose Duration

Created by contract Has juridical personality separate and distinct Realization of profit No limitation

Created by law None

Disposal of interest

Power to act rd with 3 person Effect of death

May not dispose to make the assignee a partner without consent of the partners a partner may bind the partnership Dissolution

Common enjoyment of a thing or right An agreement to keep the thing undivided for more than 10 years is not allowed May freely do so

Cannot represent the co-ownership Not necessarily

Effect of unlawful partnership: 1. the contract is void ab initio 2. profits shall be confiscated in favor of the government 3. instruments or tools and proceeds of the crime shall also be forfeited in favor of the government 4. the contribution shall not be confiscated unless they fall under No. 3. Judicial Decree is sometimes necessary and advisable for the convenience and peace of mind of the parties

Particular partnership distinguished from joint venture A particular partnership is distinguished from joint venture, to wit: 1) a joint venture (an American concept similar to our joint account) is a sort of informal partnership, with no firm name and no legal personality. In a joint account, the participating merchants can transact business under their own name, and can be individually liable therefore; and 2) usually, but not necessarily a joint venture is limited to a single transaction, although the business of pursuing to a successful termination may continue for a number of years; a partnership generally relates to a continuing business of various transactions of a certain kind. Relations created by the contract of partnership 1. among the partners themselves 2. partners with the partnership 3. partnership with a third person rd 4. partners with the 3 person

Obligations of a partner a. give his contribution b. to answer for eviction in case the partnership is deprived of the determinate property contributed c. not to convert firm money or property for his own use d. not to engage in an unfair competition with his own firm e. to account or hold as a trustee of an unauthorized personal profit f. pay damages cause by his fault g. duty to credit the firm, payment made by a debtor who owes him and the firm h. share with the partners the share of partnership credit Rights of partner a. property rights b. rights in specific partnership property c. interest in the partnership d. to associate another in his share e. inspect and copy partnership books f. demand formal account g. to ask for dissolution of the firm at proper time

CAPITALIST PARTNER - cannot engage in business (with same kind of business with the partnership) for his own account, unless there is a stipulation to the contrary. ( Art. 1808) CONSEQUENCES IF AN INDUSTRIAL PARTNER ENGAGES IN ANY BUSINESS: (Art. 1789) 1. he can be excluded from the partnership; or 2. the capitalist partners can avail of the benefit he obtained from the business, or 3. the capitalist partners have the right to file an action for damages against the industrial partner, in either case. Obligations with respect to contribution to partnership capital: -Partners must contribute equal shares to the capital of the partnership unless there is stipulation to contrary (Art. 1790) Art. 1791. Partners (capitalist) must contribute additional capital in case of imminent loss to the business of the partnership and there is no stipulation otherwise; refusal to do so shall create an obligation on his part to sell his interest to the other partners Requisites: a. There is an imminent loss of the business of the partnership b. The majority of the capitalist partners are of the opinion that an additional contribution to the common fund would save the business c. The capitalist partner refuses deliberately to contribute (not due to financial inability) d. There is no agreement to the contrary Obligation of managing partners who collects debt from person who also owed the partnership (Art. 1792) a. Apply sum collected to 2 credits in proportion to their amounts b. If he received it for the account of partnership, the whole sum shall be applied to partnership credit Requisites: a. There exists at least 2 debts, one where the collecting partner is creditor and the other, where the partnership is the creditor b. Both debts are demandable c. The partner who collects is authorized to manage and actually manages the partnership - debtor has the right to prefer payment into the more onerous debt Obligation of partner who receives share of partnership credit a. Obliged to bring to the partnership capital what he has received even though he may have given receipt for his share only (Art. 1793) Requisites: a. A partner has received in whole or in part, his share of the partnership credit b. The other partners have not collected their shares c. The partnership debtor has become insolvent

Obligations with respect to contribution of property: a. to contribute at the beginning of the partnership or at the stipulated time the money, property or industry which he may have promised to contribute (Art. 1786) b. To answer for eviction in case the partnership is deprived of the determinate property contributed (Art. 1786) c. To answer to the partnership for the fruits of the property the contribution of which he delayed, from the date they should have been contributed up to the time of actual delivery (no demand needed) (Art. 1786) d. To preserve said property with the diligence of a good father of a family pending delivery to partnership (Art. 1163) e. To indemnify partnership for any damage caused to it by the retention of the same or by the delay in its contribution (Arts. 1788, 1170) EFFECT OF FAILURE TO CONTRIBUTE PROPERTY PROMISED: 1. Partners becomes ipso jure a debtor of the partnership even in the absence of any demand (See Art. 1169[1]) 2. Remedy of the other partner is not rescission but specific performance with damages from defaulting partner (Art. 1788) Contribution consist of goods its appraisal is made : a. prescribed by the contract b. made by experts chosen by the partners c. current prices Obligations with respect to contribution of money and money converted to personal use: a. To contribute on the date fixed the amount he has undertaken to contribute to the partnership b. To reimburse any amount he may have taken from the partnership coffers and converted to his own use c. To pay for the agreed or legal interest, if he fails to pay his contribution on time or in case he takes any amount from the common fund and converts it to his own use d. To indemnify the partnership for the damages caused to it by delay in the contribution or conversion of any sum for his personal benefits PROHIBITION AGAINST ENGAGING IN COMPETITIVE BUSINESS INDUSTRIAL PARTNER - cannot engage in business (whether the same business or any other kind) unless partnership expressly permits him to do so. (Art. 1789) to avoid conflict of interest and faithful compliance of his obligation.

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